Industry bosses warn PM against green cuts

Construction leaders write to David Cameron urging him to ditch plans to cut green levies on energy bills

The bosses of Carillion, Keepmoat, Quintain and Willmott Dixon are among more than 50 industry leaders who have written to the prime minister today to urge him against moves to cut green levies on energy bills.

Last week, the prime minister announced he would “roll back” green levies on energy bills, which fund renewable energy projects and energy efficiency work, in response to a series of energy price hikes and Labour’s pledge to freeze energy bills if elected in 2015.

But in a letter organised by the UK Green Building Council industry leaders warned the prime minister that cutting schemes such as the Energy Companies Obligation (ECO), which provides for retrofit work in poor households and is funded through a levy on energy bills, would be counter-productive.

The letter (published in full below) said: “Using less energy by improving the efficiency of our housing stock is the only sure way to protect households against rising bills in the long term.

“A key component of so-called green levies is the Energy Company Obligation (ECO) scheme, which is specifically designed to improve the energy efficiency of vulnerable and low income households and ‘hard to treat’ properties, such as those with solid-walls.

“If ECO was in any way rolled back it would have the perverse effect of increasing energy bills for these consumers, with severe consequences for jobs in what should be a growth sector of the economy.”

It said the cost of the ECO could be reduced by introducing greater incentives for the Green Deal, the ECO’s sister scheme, to allow it to support more of the cost of retrofit work.

Building has been calling for greater long-term incentives for the Green Deal since January through its Green for Growth campaign and is also a signatory to the letter.

The UKGBC letter suggested introducing a variable stamp-duty based on the energy efficiency of the home would be a suitable incentive to drive take-up of the Green Deal.

It added that such a move could be designed to be “cost neutral” to the Treasury.

The letter comes as energy secretary Ed Davey has said he will “fight like a tiger” against the Tories’ attempts to cut green levies on energy bills, many of which support construction work.

Speaking to The Guardian, Davey said he would not let the Conservatives “touch renewable energy” in an attempt to win favour with the electorate following energy price hikes and Labour’s pledge to freeze bills if elected.

But Davey told the Guardian: “I am not going to give up on renewable energy, they are not going to touch it, and I am not going to betray the fuel poor. That’s for me is a complete red line. I feel passionate about that.”

He added: “The green taxes we have been pushing as Liberal Democrats in this government have been extraordinarily successful and point to an extremely green, clean energy future. They’re not being touched and they won’t be touched. It’s incredibly important for investors that they hear that.”

“Let’s be clear how hard we’ve fought for this,” he said. “We fought hard for green taxes and won. The Tories wanted to get rid of fuel poverty targets. I stopped them. We’d be completely daft to get rid of those because what you’d be doing is solving the energy bill crisis on the backs of the poorest. No, absolutely not, won’t agree to it, forget it.

“If that can be funded in a more generous way, then hey I’m all ears.”

Industry letter in full

Dear Prime Minister

As you are well aware, the rising cost of energy is a major issue. In fact, according to recent market research, energy bills are now the single most worrying expense for British households. However, we are concerned about your recent statement “We need to roll back some of the green regulations and charges that are putting up bills.”

Using less energy by improving the efficiency of our housing stock is the only sure way to protect households against rising bills in the long term. A key component of so-called green levies is the Energy Company Obligation (ECO) scheme, which is specifically designed to improve the energy efficiency of vulnerable and low income households and ‘hard to treat’ properties, such as those with solid-walls. If ECO was in any way rolled back it would have the perverse effect of increasing energy bills for these consumers, with severe consequences for jobs in what should be a growth sector of the economy.

The cost of ECO could be reduced if the Government’s flagship green policy, the Green Deal, was delivering. Simply put, the greater the contribution that can be made to retrofit costs by the Green Deal, the less is required of ECO, and the lower the charge levied on all bills. We strongly believe that one of the best ways to encourage uptake of energy efficiency measures and increase demand for the Green Deal is to provide a new financial incentive for householders, based around Stamp Duty.

There are a number of ways of designing such a scheme, but in essence, more energy efficient homes would attract a slightly lower level of Stamp Duty, in much the same way as a more efficient car attracts a lower level of car tax - which has been remarkably successful in shifting consumer buying behaviour. Importantly, people carrying out energy efficiency work after a home purchase would be able to claim a rebate on some of their tax. It would help ensure that homebuyers consider the efficiency of the property they are buying, which can have a huge impact on their future energy bills.

With the housing market recovering and the number of sales rising, the Treasury is likely to see an increase in revenue raised through Stamp Duty by around £2billion over the next year or so. The incentive scheme could be designed in a cost neutral way, or by using a small proportion of this revenue without having an impact on the Government’s fiscal commitments.